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KFM Weekly Investment Update: Friday, 13 January 2017

Local Market Summary

• Prime Minister Peter O’Neill has agreed with the World Bank’s forecast of a 3.0% growth in the national economy this year which was an increase from the 2.4% growth last year. PM O’Neill attributed the 14-year economic boom to the favourable commodity prices, construction, establishment and commissioning of the PNG LNG project. PM further confident that with the approval of the four potential resources projects available, the construction efforts alone will push the economic growth projections into double digits again. Meanwhile the Government has taken a cautious approach with these projects to ensure that the country is in a better position

• PNG is ready to host the APEC Summit in 2018. Minister for Sports, National Events and APEC, Justin Tkatchenko said during the announcement of the 10th Ministerial Meeting which will be one of the major meets held leading up to the APEC Summit. As far as they are concerned, procedures and guideline are being followed to make sure PNG will be ready in 2018. He advised that the biggest issue at hand is not the preparation on the ground; it’s more of the security aspect

• As announced by Finance Minister James Marape at the public service dedication service, the 150,000 public servants (in the country) only made up 1.9% of the eight million population and the public service wage bill is expected to increase to 34.0% of the National Budget this year from 26.0%

• The Institute of National Affairs executive director Paul Barker said, 2017 will be another challenging year for PNG despite commodity prices improving and for number of reasons; one obviously is the external economy factors are still tough. Mr Barker said with funding to cover the 2017 National Elections and 2018 APEC preparation taking precedence for government funding this year, other key sectors will be affected. The 2017 National Budget had seen a slight decrease in budgetary allocation to all sectors of the country’s economy

• National Information and Communications Technology Authority, CEO Charles Punaha announced that it granted three licenses to ABS Global Satellite Ltd (AGSL) to provide ICT services in PNG. AGSL will support a wide range of data services which include broadband internet connectivity and internet protocol trunking

• KPHL MD Wapu Sonk congratulated the beneficiary groups which have agreed to acquire the Kroton equity in PNG LNG project. They signed the unit application agreement to exercise their Kroton Equity using KPHL’s vendor financing. According to Mr Sonk, the role was to implement the agreement reached along the terms expressed in the Umbrella Benefits Sharing Agreement (UBSA) and provide additional benefits for the Land Owners and provincial governments. Meanwhile KPHL will work with the beneficiary groups that have signed to complete the corporate/statutory aspect of transaction for their shareholding interest in Kumul Petroleum

• The Mining and Petroleum Industry Fund (MPIFL) has been invested with K18.0m since 2014. This was announced by Chris Trainor, the Commercial Consultant of Barrick Niugini in last month’s PNG Mining and Petroleum Investment Conference in Sydney. He revealed that MPIFL has a membership of 221 and total investment of K18.0m, from which K3.3m has been paid to Porgera landowners. He further explained that the main aim for MPIFL is to provide a mechanism for landowner compensation to invest in and any mining or petroleum company in PNG can join

• The Independent Consumer and Competition Commission (ICCC) advised that fuel prices have increased and this was attributed to the changes to the increase in Import Parity Prices (IPP). Petrol price increased by 16toea per litre to K3.16 from K2.99. Diesel also went up by 16toea per litre to K2.55 from K2.38 and Kerosene increased by 15toea to K2.38 from K2.55. Commissioner and CEO, Mr Paulus Ain said the increase in the IPP was because of the increase to the crude oil prices last December

• Furthermore, Mr Ain advised that ICCC’s investigation is still continuing on its independent assessment on the purchase of InterOil by ExxonMobil. It stated that given the complexity of the different segments (upstream to downstream) of the petroleum industry that are likely to be affected, the projected transaction needed careful review

• This week’s BPNG auction in Central Bank Bills was only offered for 28 days with an under-subscription of K282.5m out of a total of K300.0m on offer. The weighted average yield was 1.15%

• This week’s BPNG auctions in Treasury Bills were under-subscribed by K4.5m out of the K235.4m on offer. Weighted average yields were 2.59% for 91 days, 4.72% for 182 days, and 7.78% for 364 days

• Both the Kina Securities Home and main Index remained unchanged at 4,812.98 points and 10,628.44 points respectively

International Market Summary

• US stocks ended the week lower as investors eagerly anticipate fourth-quarter corporate earnings and details of the incoming president-elect Donald Trump’s long awaited economic policy ahead of his inauguration. For the week, the Dow dropped 0.4% to 19,891 points, the S&P 500 dropped 0.3% to 2,270.44 points while the Nasdaq inched 0.5% up to end at 5,547.49 points

• Asian stock markets were mixed by closing time as trade data disappointed investors combined with bleak investor sentiment following U.S. president-elect Donald Trump’s news conference which still leaves an impression of uncertainty in the market as the new administration takes shape. The Nikkei was down 0.9% to end at 19,287.28 points while the Hang Seng was up 1.9% to end at 22,928.30 points

• Both OPEC and non-OPEC oil producers have reached an agreement to lower oil production by more than 1.7 million barrels per day for the next six months starting January 2017 with a provision in the agreement which allows for a further six months extension subject to market conditions

• PGK/USD remained unchanged for the week to close at 0.3150, PGK/AUD was down by 2.3% to close at .4209 whilst AUD/USD decreased by 2.3% for the week to end at 0.7485

Click the link below to view the full daily market report in PDF.

pdfKFM Weekly Investment Update: Friday, 13 January 2017

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